Depression in Russian smaller cities continues rising, while state-run major corporations continue counting their profit. Nevertheless, most people in Russia are ready to endure any hardships. As they say in Russia - anything for a life without war. The psychology of the Russian person does not change and there is no leader who can change this.
Real income of the population does not grow
A study conducted by Romir public opinion research centre said that the volume of extra money in the average Russian household has decreased in October by 500 rubles or 2.2 percent as compared with September. Thus, the average Russian family has 22,000 rubles ($334) to spend after all bills are paid. Residents of smaller Russian cities with the population of 100,000 have suffered largest losses: 15,100 rubles of extra money a month, which marked a decline by 1,000 rubles as compared to September. The data suggests that the real incomes of most Russians do not grow, even though officials speak of the opposite. For example, German Gref, the head of Russia's largest bank, Sberbank, stated that Russian people started raising more loans and switched from savings to consumption. In reality, however, inflation and taxes eat the nominal growth of wages. Many Russians raise new bank loans to be able to repay the loans that they had raised before. Thus, a study by Equifix Bureau of Credit Histories said that overdue debts of the population to microfinancial institutions amounted to 35.4 billion rubles, which marked a record of 40.3 percent of the number of loans in the credit portfolio.
The Duma and the government are too far from people
Meanwhile, the government and the Duma continue making people's wallets thinner. Having raised the value added tax (the move that will raise prices in the country on all goods and services without exception), and the retirement age, the government proceeded to introducing a new tax on those individuals who take extra work (self-employed tax). To make matters worse, the government considers taxing "unhealthy food products" (such as sausages, for example) and introducing new insurance payments.Russians can get ready for mandatory real estate insurance, a rise in property taxes in connection with the transition to the cadastral base of valuation and so on. At the same time, however, the level of unemployment in provincial Russian cities has been on the rise lately. Such a state of affairs is supposed to disseminate protest sentiments in the country, the popularity of the ruling party is supposed to decrease too. However, most people still go to the polls to vote for United Russia. Nikita Isaev, director of the Institute of Actual Economics, told Pravda.Ru that there was economic growth in Russia. "It is formed in revenues from state corporations - oil and gas, banking, financial sectors, and so on. Most of the households that receive these revenues are concentrated in cities with a population of over one million. If we talk about a possible increase in population income, one does not talk about smaller cities and towns, where people survive," Nikita Isaev said. The state of affairs in Russia will get even more dangerous in 2019, the expert believes. "I traveled by car across Russia from Moscow to Sakhalin this year and talked to people from 29 regions. People told me that they were ready to make up with an increase in the retirement age, although it was not an unfair move on the part of the government. "They told me that they were ready to live for 6,000 rubles without social benefits and grow their food - they are ready for anything for a life without war. This is what the Russian people are all about - they are ready to endure everything at all times," Nikita Isaev noted."As our economic crisis is entering its fifth year, one has to admit that economic problems do not improve the situation. One needs a competitive form of economic and political structure, as well as the political will of the leader. Russia is so rich with natural and human resources, but Russia is also a part of the world that tries to defend itself from the cruel West," Nikita Isaev told Pravda.Ru.

Unemployed Russian citizens will have to pay all insurance contributions to social funds for themselves. It goes about the fees to the pension fund, the mandatory medical insurance fund and the social insurance fund. The new rule will affect only able-bodied individuals of working age who officially do not work anywhere.The suggestion in the draft law "On Amendments to Article 23, Article 419 and Article 425 of the Tax Code of the Russian Federation" was prepared by a member of the State Duma Committee on Labor, Social Policy and Veterans Affairs Sergei Vostretsov.Under the current law, the fees to the Pension Fund, the Mandatory Medical Insurance Fund and the Social Insurance Fund are paid by the employer (for employed individuals). In total, they make up 30 percent per month and give the right to free health care services, retirement benefits, sickness allowance, maternity and child care allowance. Every month, the employer shall transfer the following taxes for every employee: 22 percent to the Pension Fund, 5.1 percent to the Compulsory Health Insurance Fund and 2.9 percent to the Social Security Fund. The personal income tax is withheld from every employee as well. Vadim Gorshenin, the chairman of the Board of Directors of Pravda.Ru found a number of interesting nuances in Vostretsov's initiative. "From his initiative, we learn that 18 million Russians of working age do not work anywhere officially. I looked into the Rosstat data (I did not find the data for 2018), and in 2017, there were 3.967 million unemployed people in Russia, which accounted for 6.6 percent of the total working-age population. As of January 2018, Rosstat announced that the unemployment rate in Russia declined to 5.2%, that is, to 3.918 million."At the same time, Russian officials announced that the unemployment level in 2018 reached its all-time low. All of a sudden, we can see Mr. Vostretsov saying that there are as many as 18 million unemployed people in the country. Let's take these figures as a basis and we will find out that the unemployment level in today's Russia actually makes up 15 percent - the highest in the 2000s. Before that, the record was 9.4 percent - 5.544 million people."There is something that I like about Mr. Vostretsov's initiative - namely the need for unemployed citizens to cover their own social welfare spending. Such a measure should educate civil feelings and understanding of what our common state budget is made of. I have long proposed to introduce this principle with respect to all citizens in general, rather than just a single category of people. On the other hand, what if such a move would double or triple the unemployment rate?"In the meantime, there is a clear understanding that the treasury is empty while oligarchs keep counting their growing dividend from privatised mineral companies."Vadim GorsheninPravda.Ru Chairman of Board of Directors
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Experts believe that the rate of the Russian ruble may collapse again just like it happened during the crisis in 2014. In turn, Russian companies may deal with the shortage of currency to pay their debts on foreign markets. Pravda.Ru reported earlier that the net outflow of capital from Russia during the first ten months of 2018 made up $42.2 billion, which was three times as much as in the same period last year. This is the largest capital outflow figure that Russia has seen since 2014. Almost all of the additional income that Russia has received from growing oil prices was levelled off because of the outflow of capital, chief economist at VEB (Vnesheconombank, Foreign Economic Bank) Andrei Klepach believes. "If we look at the dynamics of the ruble exchange rate and its separation from the dynamics of oil prices, we can see that all the revenues obtained from the current oil price of $70 per barrel as opposed to the earlier predicted price of $50, have been taken out of the country. In other words, nothing of those extra revenues has settled in the Russian economy - everything was taken out," said Andrei Klepach.Valentin Katasonov, a professor at the Department of International Finance of MGIMO, told Pravda.Ru that Russian businessmen take their capitals out of Russia over the fear of economic sanctions against the Russian Federation. "They cannot handle stabs in the back that the Russian Central Bank and the Finance Ministry inflict on the Russian economy, because such things can cause their fortunes to shrink," the expert believes. The expert noted that the Russian Central Bank still violates Article No. 75 of the Constitution of the Russian Federation, which binds the bank to ensure the protection and stability of the Russian ruble. Instead, the Central Bank pursues the inflation targeting policy and has in fact abandoned maintaining the ruble exchange rate by conducting currency interventions."This may eventually cause the currency to collapse again as it happened in December 2014," said Valentin Katasonov. According to the expert, there are three constituents in the outflow of capital. "First off, this is the net outflow of private capital, the second part is the negative balance on investment income - this is what Western creditors receive as interest on loans. The third part is the growth in gold reserves."According to my calculations, these constituents make the capital outflow of $100 billion a year. Elvira Nabiullina, the head of the Central Bank of the Russian Federation, gives a much smaller amount, but Central Bank estimates are nothing but bluff. The Central Bank does not control anything. To regulate the problem, one needs to restrict the movement of capital," Valentin Katasonov told Pravda.Ru.

Foreign companies will be able to access the Russian equivalent of the SWIFT payment system. The State Duma is preparing a bill designed to protect the companies that have fallen under Western sanctions in order to give them a possibility to conduct mutual settlements with foreign counterparties. Russian MPs believe that the system will function most effectively if the BRICS countries, as well as Iran and Turkey, join it. "Although they plan to use national currencies in settlements with Russia, but they do not exclude that settlements can be conducted through the Russian equivalent of SWIFT," Anatoly Aksakov, the head of the State Duma Committee on Financial Markets said. Earlier, first deputy chairman of the Central Bank, Olga Skorobogatova, said that connecting foreign companies to the financial messaging system would expand possibilities for mutual exchange of messages and settlements between sanctioned companies that do not have access to making payments through the original SWIFT system, and foreign contractors.The Russian equivalent to SWIFT is a financial messaging system known for the Russian initials as SPFS. The bill stipulates for direct messaging between both Russian and foreign legal entities.According to the Central Bank of the Russian Federation, there are more than 400 participants in the SPFS system, including banks, the federal treasury, legal entities, and corporate clients. "Inside the country, our system covers the exchange in financial messages completely," a source at the Central Bank of Russia said. "If we talk about cross-border operations, they can be implemented only on the basis of the agreement between several countries. There are such discussions happening already on the level of both the Eurasian Economic Union and BRICS."In the near future, SWIFT may have another competitor in Europe. The head of the German Foreign Ministry, Heiko Maas, said in August that the European Union was in need of its own and independent SWIFT system to protect the financial stability of European companies from US sanctions. Russia found such an intention of European partners quite natural. After the appearance of the European SWIFT system, Russia intends to offer European companies to incorporate a Russian analogue to SWIFT."The possibility to connect foreign countries to the Russian system depends on a number of factors. As for Iran, a lot depends on the volume of economic cooperation that is going to happen. So far, it has not been large at all, but there are reasons for it to grow, especially in the oil and gas sector," Nikolai Kozhanov, a researcher at the European University at St. Petersburg Energy Policy Research Center said. Turkey is already showing willingness to cooperate with the Russian SWIFT. "The Russian equivalent to SWIFT is a revolutionary innovation in the digital world. The possibility of its use by Turkish companies can provide an important development of trade relations between our countries," Mehmet Yolcu, chairman of the board of directors of FinExpertiza Turkey said.According to Dmitry Mosyakov, director of the Center for Southeast Asia, Australia and Oceania of the Institute of Oriental Studies of the Russian Academy of Sciences, China's position on the matter will depend on its relations with the United States. The worse China's relationship with the States goes, the better it is for the Russian SWIFT system. "The relations between China and the USA have been quite intense lately, but if the United States shows positive signs to China, then taking into account the volume of their trade ($500-600 billion) and China's trade volume with Russia ($100 billion as of 2018), China will demonstrate loyalty to the United States and will not connect to the Russian project," the expert said. SWIFT is an international interbank system for transmitting information and making payments. The system incorporates more than 11,000 financial institutions in 200 countries of the world. After 9/11 attacks, the United States gained access to SWIFT network in order to track possible transactions between terrorist groups. Thus, US authorities have access to information related to any payment that goes through SWIFT. Russia launched its own version of SWIFT - SPFS - for domestic financial operations in December 2014.
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SWIFT refuses to cut Russia off

Andrei Kostin, the head of VTB Bank, shared his plans for the future of foreign currency in the Russian Federation. During the Eastern Economic Forum, Kostin, who is ranked one of Russia's most prominent bankers, suggested legal addresses of Russia's largest holding companies should be transferred under Russia's jurisdiction. According to him, foreign registrations of Russian legal entities makes the fulfilment of subsequent tasks more complicated. Kostin pointed out the need to place Eurobonds on Russian platforms and abandon the primary depository in the form of Euroclear. Many experts believe that such suggestions would take Russia towards self-isolation.The head of VTB also pointed out the need for all participants of the stock market to adhere to "unified rules." Some assumed in Russia that Mr. Kostin thus wanted to punish the Americans for the sanctions that they had imposed on him. In a nutshell, Andrei Kostin offered President Putin a plan to refuse from the US dollar. The plan is not very original: Kostin suggests making Russia an outcast country, in which dollar settlements would be excluded. Iran and Venezuela had taken such measures for their economies some time ago, but neither Iran nor Venezuela have showed an economic breakthrough yet. Quite on the contrary, the two nations suffer from declining national currencies and a plethora of restrictions. Some suggested Mr. Kostin could go to Venezuela or Iran to learn a few lessons there. Earlier, Andrei Kostin caused quite a stir in Russia, when he said that Russian citizens' dollar deposits could be converted at market value into rubles.Experts were more restrained in their assessment of Kostin's suggestion. Maksim Shein, the chief investment strategist of BCS, told Pravda.Ru that it makes no difference what currency banks choose to return deposits to clients - the most important thing is to have foreign currency deposits converted into rubles at market value. The problem of Andrei Kostin's statements and reactions to them is about the radical presentation of such information. It is clear to all in Russia that the national market will grow increasingly national and ruble-oriented against the backdrop of sanctions and Russia's course to economic sovereignty. Mr. Kostin tries to hold common people accountable for the economic crisis in the country. Many people in today's Russia still remember the attitude to foreign currency in the USSR. However, the Soviet Union used to have a developed social system. All the recent moves of the Russian authorities in relation to the retirement age indicate that Russia is taking a sharp liberal turn in economy. Currency restrictions do not fit into liberal reforms. Clearly, Russian banks need to develop and grow under the conditions of economic and financial restrictions, especially when President Putin talks about the need for a major economic breakthrough. The people, however, are not happy about the fact that the breakthrough is going to be made at their expense. This gives rise to panic and scathing comments about Mr. Kostin and his suggestions. It is wort mentioning that the amount of transactions signed within the scope of the Eastern Economic Forum in Vladivostok totalled nearly three trillion rubles. Perhaps it is too early to put a cross on the Russian economy and expect dark years to come.
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Russian government prepares to get rid of US dollar in economy